IBD Editorials

Retail Workweek Hits 3-Year Low In ObamaCare Shift

The fly in the ointment of January's jobs report was the apparent shift to part-time work ahead of a key ObamaCare deadline.

Although retail payrolls grew by 32,600, total hours worked in the industry dipped, Labor Department data out Friday showed.

The explanation? Rank-and-file retail workers logged the shortest workweek since early 2010: just 30.1 hours, on average, vs. 30.4 in December.

Remarkably, aggregate hours worked in the retail sector fell below their January 2012 level, even though industry payrolls are up 200,000 over that period.

A similar trend showed up in leisure and hospitality: January payrolls rose by 23,000 even as aggregate hours dipped 0.3%.

Meanwhile, the ranks of part-time workers due to business conditions or because they can't find full-time work, trending lower in the past few years, rose by 212,000 to 7.8 million.

While the data are volatile and the shift to shorter workweeks in January was less than dramatic, this may be the start of something big. All signs suggest that businesses are starting to adjust their employment policies in response to ObamaCare. It's possible that much of this shift may occur in the next few months.

The 30 Or 50 Rule

New Treasury Department guidelines released early last month give businesses until June 30 before their staffing levels begin to influence fines that may apply in 2014 when the ObamaCare exchanges launch.

The law exempts companies with fewer than 50 employees from providing health care coverage. Firms with at least 50 workers face fines based on the number of employees who receive ObamaCare subsidies, which are only available to people who lack affordable coverage from an employer.

But those fines — up to $3,000 per ObamaCare subsidized worker — won't apply for part-time workers, which the law defines as 30 hours per week.

An obvious strategy to minimize fines is to cut some workers to just below the 30-hour threshold. Staying below the 50-worker threshold — based on total hours rather than a simple head count — also may be an option.

TrimTabs Investment Research CEO David Santschi said last week he expects sluggish growth as "businesses prepare for the full implementation of ObamaCare," adding to the impact of fiscal-cliff tax hikes.

The National Retail Federation on Friday urged President Obama to "delay health care reform mandates that will force employers to cut their payrolls or reduce hours for workers."

A number of larger retail and restaurant employers have signaled that they may keep a lid on worker hours to avoid the responsibility of providing coverage that meets ObamaCare guidelines.

In some cases, these companies may already provide their workers coverage — just not sufficiently comprehensive coverage in ObamaCare's eyes.

Reuters reported in November that Wal-Mart Stores (WMT) would stop providing coverage for new part-time employees who don't work 30 hours per week.

Darden Restaurants (DRI) drew criticism last fall for saying it would cut employee hours to avoid ObamaCare's mandate. The operator of Olive Garden and Red Lobster later said it wouldn't alter hours for current staff.

Frisch's (FRS) Big Boy Restaurants said in a recent SEC filing that "the level of full-time hourly employment may potentially be decreased in favor of increased part-time employment."

Krispy Kreme (KKD) recently said it has 1,300 workers without coverage who may be entitled to it under ObamaCare at a potential cost of up to $5 million — before actions it might take "to reduce the number of employees subject to the new requirements."

Large employers of modest-wage workers that take responsibility for health care actually may hurt those employees' finances. That's because for modest earners, ObamaCare subsidies can be far more generous than the tax exclusion for employer care.

A family of four earning $50,000 a year in 2016 would save $11,300 via ObamaCare subsidies relative to employer coverage, the Congressional Budget Office has said.